As you plan for retirement, your primary goal is to set up a stream of income that will sustain you for the rest of your life. Social Security will play a part in this, as well as whatever savings, investments, and insurance options you choose. But while you're focusing on income, don't forget to pay careful attention to rising costs of things like housing, food, and health care.
Health care, in particular, appears to be the big variable for most people. While prices of most other goods and services rise very slowly over time, we have seen huge leaps in the cost of health care in just the past few years. What does this mean for retirees? Right now, the average retiree spends about $5,000 per year on out-of-pocket health care expenses, but that figure is estimated to rise to just under $25,000 per year in 2038. Ouch! It's easy to see how such a quickly-rising expense can put serious pressure on your income stream.
So what do the experts recommend for retirees who want to keep their health care spending in line? Remember these three rules.
Understand your Medicare coverage and limitations.Medicare doesn't actually pay for all of your health care needs, which is why you will incur so many expenses out of pocket. Seek to fully understand your coverage, and make plans to cover additional expenses. Some retirees find that a prescription insurance plan is necessary, while others invest in long-term care insurance.
Establish a health savings account, if you can. If you're eligible for a health savings account, then start contributing to it now! These accounts allow you to set aside pre-tax dollars for health care expenses, and any money left in the account after you retire can still be used toward that purpose. Essentially, it's another way to save for retirement while utilizing valuable tax advantages.
Take care of your health now. As the saying goes, an ounce of prevention is worth a pound of cure. Take care of your health now, and you can prevent or postpone some of the more expensive health concerns commonly seen in older folk. Stop smoking, cut back on alcohol, exercise regularly and eat a healthy diet. It's never too late to start making healthier decisions – for both your body, and your wallet.
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